Layer 7 refers to the application layer in the OSI model, which is a framework used to understand network communication. This layer is responsible for handling high-level protocols and user interactions, enabling applications to communicate over a network. Examples of protocols at this layer include HTTP, FTP, and SMTP. In Layer 7, data is formatted and presented to the user, allowing for tasks like web browsing, email, and file transfers. It ensures that the information sent and received is understandable and usable by applications, making it essential for effective communication in computer networks.